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Polity & Governance
Mahesh

24/08/22 05:05 AM IST

SC declares retrospective use of benami law unconstitutional

In News 
  • The Supreme Court declared “unconstitutional and manifestly arbitrary” amendments introduced in the benami law in 2016, which apply retrospectively and can send a person to prison for three years even as it empowers the Centre to confiscate “any property” subject to a benami transaction.
Historical background 
  • The 2016 law amended the original Benami Act of 1988, expanding it to 72 Sections from a mere nine. Amendments were opposed in SC and SC had to decide on three main issues:
  • Whether there is legislative intent to give retrospective effect to the 2016 Act
  • Whether the 2016 Act imposes a harsher penalty than the earlier Act insofar as it provides for “confiscation of Benami property rather than its acquisition”, thereby violating Article 20(1) Whether the 2016 Act is constitutionally valid.
Key Highlights of the Judgement 
  • Section 3(2): It mandates three years of imprisonment for those who had entered into Benami transactions between September 5, 1988, and October 25, 2016.
  • A person can be sent behind bars for a Benami transaction entered into 28 years before the Section even came into existence, thus it is a harsher punishment.
  • Section 5 of the 2016 Amendment Act: It said that “any property, which is the subject matter of Benami transaction, shall be liable to be confiscated by the Central Government”.
  • The court held that this provision cannot be applied retrospectively.
  • Government’s version of forfeiture and acquisition: The CJI dismissed the government’s version that forfeiture, acquisition and confiscation of property under the 2016 Act as it was not in the nature of prosecution and cannot be restricted under Article 20.
  • New class of fictitious and sham transactions: The court observed that the 2016 Act condemned not only transactions that were traditionally denominated as Benami but rather a “new class of fictitious and sham transactions”.
  • Prosecutions or confiscation proceedings quashed: Authorities concerned cannot initiate or continue criminal prosecution or confiscation proceedings for transactions entered into prior to the coming into force of the 2016 Act, viz., October 25, 2016.
Source- The Hindu 

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